Tuesday, January 24, 2012

2011 Was A Great Year For Dividend Stocks

Investing in dividend growth stocks is a long-term proposition. One of the beauties of following a dividend growth strategy is that you don't have to watch your portfolio or the market on a daily basis. For the most part, daily, monthly and yearly movements are just noise in the system.

My normal practice is to refresh my analytical spreadsheets each Friday with updated price information on the 210+ stocks that I follow. Even then, I don't normally look at the value of my portfolio or the performance of individual stocks.

However, each quarter I update my income portfolio's performance and benchmark it against the S&P 500 and other portfolios. At that time I will look at performance of individual stocks to understand the overall performance the portfolio.

Saturday, I updated my Income Portfolio's performance for the fourth quarter. Building on that, here are my Dividend Growth Portfolio's top and bottom 5 performers for the year through December 31, 2011:

Top Performers

#5. Consolidated Edison, Inc. (ED)
Consolidated Edison, Inc. is an electric and gas utility holding company that serves parts of New York, New Jersey and Pennsylvania. Utilities had a great year in 2011. ED led the the way for me.
Yield: 4.1% | 2011 Total Return: 30.6%

#4. Chevron Corporation (CVX)
Chevron Corporation is a global integrated oil company (formerly ChevronTexaco) that has interests in exploration, production, refining and marketing, and petrochemicals. I've held a position in this stock since December 2008. It has been very kind to me by returning 23.9% in 2011.
Yield: 3.9% | 2011 Total Return: 31.1%

#3. Genuine Parts Company (GPC)
Genuine Parts Co. is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. I often get the question,"Why do you own GPC." Looking at the long-term performance it is easy to see why.
Yield: 2.8% | 2011 Total Return: 34.7%

#2. McDonald's Corporation (MCD)
McDonald's Corporation is the largest fast-food restaurant company in the world, with about 32,900 restaurants in 117 countries. MCD is one of my strongest long-term performers. I am currently over-allocated in it.
Yield: 2.8% | 2011 Total Return: 39.5%

#1. Harleysville Group Inc. (HGIC)
Harleysville Group Inc. underwrites a broad array of personal and commercial coverages. These insurance coverages are marketed primarily in the Eastern and Midwestern United States. In the June review HGIC was my worst performing stock. Funny how a buyout offer can change things fast. I no longer hold this stock. The is an annualized return below is based on a sale in late September.
Yield: 2.7% | 2011 Total Return: 112.9%

Bottom Performers

#5. General Dynamics (GD)
General Dynamics is the world's fifth largest military contractor and also one of the world's biggest makers of corporate jets. Given the financial issues of the U.S. government, all defense contractors have reason to be concerned, but GD has got some very good dividend fundamentals. I may add to my position when the price is weak.
Yield: 2.6% | 2011 Total Return: -3.0%

#4. Microsoft Corporation (MSFT)
Microsoft, the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. I still like MSFT's dividend fundamentals and will continue to add to my position at appropriate times.
Yield: 2.7% | 2011 Total Return: -3.5%

#3. Owens & Minor, Inc. (OMI)
Owens & Minor Inc. is a leading domestic distributor of medical and surgical supplies to the acute care market, a health care supply chain management company, and a direct-to-consumer (DTC) supplier of testing and monitoring supplies for diabetes. Free cash flow is a concern for OMI and its share price performance reflected it.
Yield: 2.7% | 2011 Total Return: -5.1%

#2. CenturyLink Inc. (CTL)
CenturyLink, Inc. provides voice service to 6.5 million customers and Internet service to 2.4 million customers in rural towns as well as larger cities such as Las Vegas. CTL maintained the #2 slot from the last review. Its free cash flow payout has been rising, so I have drastically cut my position in this stock.
Yield: 7.6% | 2011 Total Return: -16.1%

#1. Emerson Electric Co. (EMR)
Emerson Electric Co. designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial, and consumer markets around the world. Share price peaked early and declined hard.
Yield: 3.2% | 2011 Total Return: -20.5%

To avoid short-term anomalies, I excluded stocks that I did not own on January 1, 2011 from the above lists. As noted above, investing in dividend growth stocks is a long-term proposition, but sometimes it is nice to see that our portfolio is performing well, in addition to collecting higher dividends each month.

Full Disclosure: Long in all the aforementioned securities, except HGIC. See a list of all my income holdings here.

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Tags: [MSFT] [MCD] [CVX] [EMR] [GD] [GPC] [HGIC] [OMI] [CTL] [ED]